Face-Off: Halliburton Vs. Exxon Mobil

"Most people never run far enough on their first wind to find out they've got a second."

William James

Two large corporations - Halliburton and Exxon Mobil - are going to be examined in detail and pitted against each other in the hopes of finding a victor. Detailed data has also been provided on three other plays for investors who might be looking for other ideas. At the end of the article we will offer our opinion as to which one is better.

Halliburton also sports better current and quick ratios, has a much lower payout ratio and has generated better returns in the past 10 years than Exxon. It also has a higher projected EPS growth over the next 3-5 years than Exxon. It also leads Exxon on quarterly revenue and earnings growth rates - 36 and 49% respectively vs. Exxon's 15% and 1.6%, respectively.

One could argue that the host of lawsuits are a black cloud hanging on Halliburton, and this is clearly reflected in its share price. While Exxon's shares are trading close to its highs, Halliburton's are trading close to 52 week lows. Even though it's possible many of these cases could/might end up being dismissed, one can never predict how things will actually unfold in the future. Here are some of the pending cases the outcomes of which could potentially have a material impact on Halliburton.

BP has opened 2012 with a new legal move in its battle to force contractor Halliburton to help pay the costs and expenses it incurred to clean up the 2010 Gulf of Mexico oil spill, which the oil major previously put at around $42 billion. Halliburton, the company that cemented the doomed well, had asked a court to force BP to recognize a contractual agreement that protected Halliburton against possible spill clean-up costs.

In response, BP asked a court in a filing on Monday not to give a summary judgment on that request - one that would hand down a ruling without a full trial being held and could let Halliburton off the hook for a share of the total spill costs.

In a pair of lawsuits filed Friday, Halliburton accuses BP of fraud and defamation, saying BP provided inaccurate information about the location of oil and gas producing zones in the well before the cementing job Halliburton performed.

The final cement job in the well is supposed to push cement at least 500 feet above the deepest formation that has hydrocarbons. Halliburton claims BP failed to inform it of several formations in an effort to save money on changes to the well design that would have been needed.

Without knowing the proper locations of the formations, Halliburton says, the company wasn't able to design a cement mix appropriate for the conditions.

The justices unanimously ruled that a U.S. appeals court erred in rejecting class certification in a securities fraud lawsuit filed in 2002 on behalf of all buyers of Halliburton stock between June 1999 and December 2001.

The high court reinstated a lawsuit by a group of mutual and pension fund investors who claimed Halliburton understated its asbestos liabilities while overstating revenues in its engineering and construction business and the benefits of its merger with Dresser Industries.

Halliburton faces lawsuits over groundwater pollution near a now-closed facility in Oklahoma that cleaned missile casings for the U.S. Defense Department during the Cold War, the company said on Friday.

Halliburton, which now specializes in oilfield services, said one of its units cleaned solid fuel from missile casings between 1965 and 1991 at a semi-rural facility on the north side of Duncan, Oklahoma. It was closed in the mid-1990s.

A component of the fuel was ammonium perchlorate, a salt that is highly soluble in water. Halliburton said it had been discovered in the soil and groundwater on its site and in certain residential water wells near the property.

On the other hand, one could argue that a lot of the worst news is already priced in and that any form of good news could send the stock soaring.

From a technical perspective Halliburton appears to be trying to put in a bottom and a weekly close above $35 will turn the outlook bullish. While Exxon does have a higher yield and a higher five-year dividend growth rate, one could argue that Halliburton overcomes this shortfall with higher capital gains. This one is truly hard to call and if push came to shove we would lean with Exxon only because no one can predict with any degree of certainty how these lawsuits will pan out.

Which one do you think would make for a better investment and why? Also please let us know if you like this series and what other stocks you might want us to compare. We cannot promise that we will cover all the stocks mentioned but will try at least to cover the most compelling ones.

What we think a lot of investors can agree on is that the markets are extremely overbought, and that it would be best to wait for a pullback before committing large sums of money to this market.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: EPS, Price, EPS surprise charts obtained from zacks.com. A large portion of the historical data used in this article was obtained from zacks.com.